Dematerialization is the process of converting physical financial instruments such as share certificates, mutual fund investments, and bonds into electronic form. An Investor who needs to dematerialize his shares needs to open a Demat account with Depository Participant. These physical shares are then surrendered by the investor and in return he gets electronic shares in his demat account.
A Demat account is similar to a bank account. When you receive your bank statement, you will see 2 columns – deposits and withdrawals of money and balance money in the account on the last day of the statement. Similarly, a Demat statement will show the investments you have bought, sold and the balance investments held on the last day of the statement.
Advantages of Demat
- Holding your investments in Demat form is easy and convenient.
- You don’t have to face the problem of losing investment certificates or receiving forged certificates.
- Transferring securities becomes easy.
- You incur lower costs associated with transactions when compared to physical buying and selling of securities.
- You receive bonus shares and share splits automatically.
- You receive dividends directly to your bank account.